Global Market of Electric Cars and Participation in it Tesla Inc.

The electric car market is a very prosperous and promising one, which will base and reform the auto market in the foreseen future. There are two main types of electric cars: those that are powered by both electricity and petrol (HEVs and PHEVs) and fully electric vehicles (BEVs), however this case study will focus on fully electric vehicles and elaborate its main opportunities and challenges in the global market. (Ergon, 2018)

The electric car industry gained popularity in the last couple of years since it provides solution for the following concerns: global awareness in air pollution and limited oil reserves are affecting the car industry and sales in cars are still booming.

The oil price rise also justifies the need for a substitute option for traditional cars. For these reasons we can see that the actual business environment is supporting growth of the EV market. The most significant players in this industry are Tesla, BMW, Nissan, Chevrolet, Ford, Volkswagen. Most of these companies manufacture traditional cars and HEVs and are not solely specialized in electric cars. (Persistence Market Research, 2016)

The solution that electric cars provide is that they emit zero green-houses gases during driving as they are run by an electric engine, which is their major differentiator from traditional cars. One of the main stakeholders of EV’s (electric vehicles) is the government and environmentalists. Some governments (e.g. Norway, China) are seeking to lessen the harmful impact on the environment and heavily promote electric cars by setting goals and subsidies. (Utility Drive, 2018)

By driving EVs, not only greenhouse gas emission can be lessened, but they are also less noisy compared to traditional cars and this way sound pollution is also mitigated.

Still, many people argue that the production process of lithium batteries are extremely harmful to the environment, as well as its disposal, which is considered to be a weakness of the industry. (Deutsche Welle, 2018)

The market for EVs are segmented based-on driving missions: the two major categories are driving around town and commuting. (Hodson, Newman, 2009) On the basis of technology, the electric vehicles market is divided into hybrid electric vehicles, plug-in hybrid electric vehicles and battery electric vehicles. (Persistence Market Research, 2016)

The market of the EVs is considered to be a global market and according to the IEA (International Energy Agency) the number of electric cars rose by 54% in 2017. The most significant market remained China with approximately 580,000 of sold electric cars in 2017. The second largest market is the United States with around 280,000 electric cars sold in 2017. (Assis, 2018).

China is trying to promote EVs with national and local subsidies to help out drivers with the high upfront costs. The goal until 2020 is to reach 5 million EVs in China and 50 million by 2030. (Yang, Yan, Xinyang, Yangija, Jun, Yingqing, 2018) According to McKinsey the EV market in Europe grew by nearly 40 percent from 2016 to 2017, however, the number of sales is still only a fragment of China’s sales. The most significant European BEV consumers are Germany and Norway, and the latter is aiming to have a 100 percent BEV new car sale by 2025. (Deutsche Welle, 2018)

A leading company in the electric car market is Tesla Inc. Its geographic market analysis its revenues from 2016 are from the United States, China and Norway and only 20% is from other countries. (MergentOnline, 2018) Looking at Tesla’s demographic segmentation, we can see that the age is generally speaking between 25-65 depending on the car models, and the target groups work as employees, professionals, senior managers or executives which is explained by the income levels of these groups. The behavioral segment explains the benefit sought of the costumers which are the following: perception of being environmentally friendly, long-term effectiveness and status. (Dudovskiy, 2018)

One concern in the market is about the costs of the cars that can range between 32,000- 83,200 dollars or even more. Even a lower-priced electric car is multiple times a similar category traditional car. Fortunately, as battery prices drop the cars will be cheaper as well and has already been fallen by 80% this decade. The battery prices have fallen 24% in the last 2 years from around 460 dollars a kilowatt an hour to 200. (Bloomberg New Energy Finance, 2017)

As earlier mentioned, producing and disposing lithium batteries are also creating concerns indirectly, since the total process of EVs are not zero-emission. This suggests an opportunity to provide battery disposal services.

Future of the Industry

There is an opportunity in innovation in terms of batteries in accordance with the needs, especially in making fast charging batteries which allows longer travels. According to IEA an estimated 3 million private chargers were at homes and workplaces in 2017. There were also around 430 000 public charger stations globally in last year, however, only around 25% percent of those are fast chargers.

In order to solve the mentioned challenges, companies are focusing on next-gen batteries which are going to be faster to charge, have a longer life-time and are designed to be more eco-friendly since they do not contain dangerous chemicals (Engerati, 2018) Solid state batteries are one type of these new-gen models which are going to be introduced in 2020 by Dyson, who announced to enter the EV market with this step.(Bomey, 2015, Sorvino, 2017) If battery capacity continues to go up, the costs of the car will spread over a longer period which lowers the vehicle’s total costs for consumers.

As the mentioned points suggest demand is rising for electronic cars which goes hand in hand with technological innovations and this trend assumes a market growth. Consequently, there will be a wider choice of electric cars and a wider price range. According to the IEA’s New Policies Scenario there will be approximately 125 million EVs owned globally by 2030, however with the increasing importance of sustainability and climate changes this could be even 220 million.

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